Paying tax as a GP locum

When you become a GP locum you need to inform HM Revenue and Customs (HMRC) that you are self-employed. You should do this soon after you start as a locum and you can do this here. You should register by 5 October in your business’s second tax year otherwise you could be fined.

How you pay your tax

The tax years runs from 6 April to the following 5 April and because you are self-employed you need to complete a tax return each tax year.

The filing deadline for submitting your tax return online is 31 January following the tax year end. If your return is submitted late you will incur an automatic filing penalty of £100 which can increase to daily penalties.

As an employee, your tax and national insurance is deducted at source each month and you are paid net. Once you start as a locum, the practices will pay you gross of tax and you will be responsible for saving and paying your tax.

Your tax is paid twice a year and is due by 31 January and 31 July. Although there are two payment dates, you actually pay three instalments of tax for a tax year.

It is extremely important that you are saving for your tax as you earn it and you should save at least a third of your income for tax. In your first year of starting, you are not required to make any payments on account (unless you have previously submitted tax returns) therefore you have a long gap between the time you start working as a locum and when you pay your first tax bill.

Example of tax payments

A GP starts as a locum in August 2019, their first tax return will be for the year ended 5 April 2020 (2019/20) and their first tax payment will be payable by 31 January 2021. They have completed their tax return for 2019/20 and they have a tax liability for the year of £20,000.

The tax payments will be as follows:

31 January 2021

Balance for 2019/20

£20,000

1st Payment on account 2020/21

£10,000 (calculated as 50% of tax for 19/20)

Total payable

£30,000

31 July 2021

2nd Payment on account 2020/21

£10,000 (calculated as 50% of tax for 19/20)

HMRC will automatically calculate that this GP has to make tax payments in advance of their tax liability for 2020/21. These payments are calculated as half of the previous year’s (2019/20) tax liability.

Once the tax return for 2020/21 is completed the total tax liability is compared to the payments on account and the balance is payable the following January i.e. 31 January 2021. This is the third instalment of tax for the tax year, plus a payment on account is paid in advance for the following tax year.